On Tuesday I introduced readers to five companies that the market rally of the past six months has left behind. All five companies were candidates for my Roth IRA portfolio.
Today I'm telling you which company will be getting my vote of approval, and I'm backing up my pick by making a bullish CAPScall on my All-Star profile. I'll also offer you a special free report on the one stock our analysts think you need to buy in 2012.
But first, here's why I'm not investing in the other four
Let's make one thing clear: No stock is perfect. So as I'm reviewing my main objections to the following four companies, keep in mind that I still hold them in high regard.
Heckmann (NYS: HEK) specializes in disposing of the wastewater involved in the fracking process. If fracking continues to operate just as it has for the past half-decade -- and Heckmann is able to leverage its first-mover advantage -- the company will surely be a long-term winner. But with the process causing so much controversy, and the technology that exacts natural gas rapidly changing, I'm willing to watch from the sidelines for now.
Travelzoo (NAS: TZOO) was able to get investors excited about the company last year with the success of its Local Deals offering. However, the past couple of months have shown that the couponing model may not meet the hype that greeted fellow coupon-provider Groupon. The stock is certainly cheap, but I'm waiting to see whether Local Deals will be a sustainable revenue generator or is simply a flash in the pan.
Genealogy website Ancestry.com (NAS: ACOM) certainly has some tempting numbers. Earnings grew 72% last year, yet the P/E is sitting at 17. Even more tempting, the price-to-free-cash-flow sits at a very low eight. Here's the problem: I don't necessarily "get" the idea of paying a monthly fee to research my roots. A one-time, month-long research project? Sure. But I need to get inside the mind of an amateur genealogist to be convinced that market saturation isn't just around the corner.
And finally, I'm going to follow Warren Buffett's advice to focus on my own realm of competence when it comes to chemical producer Balchem (NAS: BCPC) . Though I'm familiar with some industry players, and the company certainly looks like a fair deal at today's prices, I am simply not familiar enough with the company to put my money behind it.
This won't be an Ugg-ly pick
Therefore, my pick for my Roth IRA this month is Deckers Outdoor (NAS: DECK) . There are three big reasons I'm excited about this maker of Ugg boots and Teva sandals .
First, I have great respect for CEO Angel Martinez and his talented management team. Martinez has been in the shoe industry for some time -- having worked in the past for Reebok and Rockport and served as CEO of Deckers since 2005. I'm also happy to see that he owns about 240,000 shares of Deckers -- just shy of $15 million in all.
Furthermore, I like where the business is headed. Martinez and his team have done a great job turning both the Ugg and Teva brands into year-round shoe offerings. The problem is that in most stores, the whole line of products isn't being displayed. So Martinez and his team have started building out retail stores -- both domestically and abroad -- to highlight all that these brands have to offer.
Finally, I think the market is missing out on a growth story here. Though the company is only expected to raise earnings by 1% in 2012, that growth is also expected to resume thereafter at a 20% clip. That, combined with the fact that Deckers has beaten analyst estimates every quarter for the past four years, tells me that this company's worth holding onto.
I think Deckers is worthy of your consideration, especially because of its potential growth abroad. If you'd like three more ideas for companies that could soon be stretching abroad, I suggest you check out our special free report: "Three American Companies Set to Dominate the World." Inside, you'll get the names of three familiar U.S. brands that are becoming increasingly influential in the world's emerging markets. Get your copy of the report today, absolutely free!
At the time thisarticle was published Fool contributor Brian Stoffel owns shares of Travelzoo and Deckers. You can follow him on Twitter, where he goes by TMFStoffel.The Motley Fool owns shares of Heckmann. Motley Fool newsletter services have recommended buying shares of Travelzoo, Balchem, Ancestry.com, and Deckers Outdoor. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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